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Mediation last hope for lawsuit settlement: Process a required step in town’s aim for relief

Before the Town of Mammoth Lakes can be forced into municipal bankruptcy, there is one more step to go.

That step would be mediation.

Anyone who has been through a nasty, contentious divorce knows what this is about. A professional mediator—a third party—steps in between the two sides and tries to bring them together into a settlement.

In this dispute, the contentious parties are the Town of Mammoth Lakes and Mammoth Lakes Land Acquisition (MLLA). MLLA wants payment in full, right now.

“Personally, I don’t see how the town can pay the full amount, or even close to the full amount,” said Town Councilman and local attorney Rick Wood.

“It would have to happen over an extended number of years.”

He said despite draconian cuts in the town’s budget, while still accounting for “essential services,” the best the town can do is pay $2.7 or $2.8 million a year, based on last year’s numbers.”

Previous to Jan. 1 of this year, the option of mediation was not a requirement in disputes involving municipalities.

But right at the last moment, Gov. Jerry Brown signed into law a stipulation that before any California municipality enters into Chapter 9 bankruptcy, there must be a stab at mediation.

The new law took effect on the first day of this year.

It’s a long shot. But it’s the only shot the town has left in this case.

Moreover, that is one of the reasons why the settlement talks have gone on for so long. The council delayed until Jan. 1 so it could take advantage of California’s new mediation law.

MLLA clearly has won its case, successfully suing Mammoth for $30 million in a jury trial in Bridgeport.

Mammoth took the case to the state’s Panel of Appeals, but lost that one, too, unanimously.

When Mammoth tried to appeal to the California Supreme Court, the court refused to hear the case, in effect killing Mammoth’s chances to reverse the decision.

In the meantime, Mammoth’s legal costs have been $12 million, making the butcher’s bill $42 million.

Since then, Mammoth and MLLA entered into talks aimed toward a settlement—how the town is going to pay this off.

Contentious? This is the Thrilla in Manila. It’s Germany and France before WII. The two sides are as far apart as any two sides can be.

How mediation works

First of all, a mediator’s findings are not binding. In other words, there can’t possibly be a change in the $42 million bill.

The aim of mediation is for a qualified, third party to bring the sides together into a settlement.

Mediation is not voluntary anymore. A town clerk or deputy clerk will schedule the mediation and have notices issued to each of the parties.

According to the new California law, at the mediation, the parties will sit down with the mediator in private and explain the problem as they see it and how they think the matter could be resolved.

The mediator oversees the discussion to allow each party a full opportunity to be heard in an atmosphere of cooperation and respect.

The parties are encouraged to generate solutions to the dispute and arrive at a settlement. A settlement will not be imposed on either party contrary to his or her will.

When agreement is reached, it may be made in writing, if all of the parties desire to do so.

Why mediate?

Mediation, unlike a formal lawsuit, is conducted in an informal setting.

Late afternoon and evening hours are available.

Due to legal restrictions, a court of law cannot always provide a remedy that will best satisfy the needs of the parties. There may exist many other more practical solutions to a dispute than would a court-rendered judgment.

Mediation can provide the opportunity to explore those other solutions.

The parties are always in control of the outcome; no one “loses” a case that is resolved through mediation.

And, because a mediated settlement is really a “win-win” solution, everyone feels much better about the outcome, especially important where the parties have an ongoing relationship.

According to the town’s financial advisor, Marianna Marysheva-Martinez, there are specific rules about whom this mediator might be.

First, it must be a person who tries to solve disputes similar to those found in mediations.

Also, the state law has to pass on the qualifications of such a mediator.

The person has to have training in conflict resolution, either for bankruptcy or municipal finance law.

The process of selecting a mediator can be a long one.

The town presents five names as its nominees. MLLA may present up to four names, Marysheva-Martizez said.

“We’re free to choose,” she said. “No one, not a judge or anyone else, appoints a mediator.”

During mediation, the parties may learn communication and negotiations skills, which can be helpful to them in resolving problems in the future.

There is nothing to risk—no one gives up the right to bring legal action if the dispute is not resolved.

Sometimes it works. Other times it doesn’t.

While municipal bankruptcy filings remain extremely rare, the concept is more frequently being considered as governments are facing falling tax revenue and rising labor, health care and retiree costs.

Alabama’s Jefferson County and Harrisburg, Pa., have both openly discussed filings and hired experts to advise them. Central Falls, R.I., filed for Chapter 9 earlier this year after it was unable to negotiate concessions from its unionized workforce.

California is no stranger to municipal bankruptcy. Orange Country filed the largest ever Chapter 9 in 1994. The city of Vallejo, Calif., recently emerged from bankruptcy after three years mired in Chapter 9.